Winter Annual Ratio (WAR) bands p It is mandatory for supply points with an annual consumption >293 MWh to be monthly-read. p For NDM monthly-read sites where the relevant meter reading history is available, a Winter Annual Ratio (WAR) value is calculated. u The WAR for a gas year is calculated based on reads loaded during the months of the previous winter. u Calculation based on the ratio of the supply point s consumption from December to March to its AQ. The supply point is then assigned to a WAR Band (either W01, W02, W03 or W04) based on its WAR value; As per the reference table above, the WAR band of the supply point determines its EUC code for example, determines whether E1503W01, E1503W02, E1503W03 or E1503W04. p The EUC code then determines the supply point s Load Factor. p The Load Factor then determines the supply point s SOQ. Therefore ultimately the SOQ for such NDM supply points is determined by its WAR band. 1
Default EUC codes In order for a WAR to be calculated, the supply point must have 2 valid reads in order to calculate its Winter Consumption; u Start Read: Between 1 st November and 31 st December. u End Read: Between 1 st March and 30 th April. What happens if there isn t a valid read in both of these periods? p If the required meter reading information is not available, the supply point is instead allocated to a default or bucket EUC code. p The default EUC code yields a load factor that is somewhere in between that of W02 and W03. EUC code WAR value Load Factor SOQ W01 Low High Low W02 Medium-low Medium-high Medium-low Default Unknown Medium Medium W03 Medium-high Medium-low Medium-high W04 High Low High In particular this presents a risk around supply points that should be WAR band W01 or W04 based on their consumption pattern, but end up in a default EUC code through lack of valid reads. u These sites will end up with an SOQ that is very different to what it should be. u This can result in dramatic year-on-year swings in a supply point s SOQ, simply as a result of whether valid reads exist for the previous winter. 2
Case study MPRN A, of Exit Zone SW1 In gas year 14/15 this supply point was allocated to WAR band W01, based on its Winter 13/14 reads. p However there were no valid winter consumption reads made for MPRN A during Winter 14/15. p Inline with the current regime, this meant that the supply point then automatically slipped into the default EUC code for gas year 15/16. Valid winter Gas Year reads available? EUC code Supply point AQ Load Factor SOQ 14/15 Yes W01 31,677,204 88.80% 97,733 15/16 No Default 30,601,488 55.90% 149,982 u As a result its SOQ increased by over 50% in 15/16 (despite a marginal decrease in AQ). u This swing is purely an artefact of lack of meter reads during the winter period, rather than a change in consumption pattern. u Resulted in a ~ 15k Gas Transportation annual cost increase for this supply point. 3
Case study MPRN B, of Exit Zone EA2 For at least 3 years in succession, this supply point was allocated to WAR band W01, based on its Winter reads. p However there were no valid winter consumption reads for MPRN B during Winter 14/15 this meant that the supply point then slipped into the default EUC code for gas year 15/16. Valid winter Gas Year reads available? EUC code Supply point AQ Load Factor SOQ 12/13 Yes W01 2,602,221 56.80% 10,515 13/14 Yes W01 1,884,924 67.80% 9,092 14/15 Yes W01 2,965,440 67.80% 11,983 15/16 No Default 3,134,036 37.90% 22,655 u As a result we saw its SOQ almost double in 15/16. 4
Case study MPRN C, of Exit Zone EM3 For at least 2 years in succession, this supply point was allocated to WAR band W04, based on its Winter reads. p However there were no valid winter consumption reads made for MPRN C during Winter 14/15 this meant that the supply point then slipped into the default EUC code for gas year 15/16. Gas Year Valid winter reads available? EUC code Supply point AQ Load Factor SOQ 13/14 Yes W04 542,881 22.00% 6,761 14/15 Yes W04 552,633 22.60% 6,699 15/16 No Default 565,896 31.20% 4,969 u As a result we saw a windfall decrease in SOQ of over 25% in 15/16 (despite a marginal increase in AQ). 5
Potential alternative approach p Unnecessary swings and instability in SOQ are not favourable for either suppliers or the customer. u The current regime results in year-on-year fluctuations in Gas Transportation charges that are purely an artefact of data availability and not indicative of a change in the supply point behaviour. p A better way of handling such cases could be to make use of WAR values from the previous year in the absence of current year reads. u Whilst out-of-date data is not ideal, it is arguably superior to not considering any of the available data. u i.e. a better default would be a band based on the last known winter consumption value. This would then work on the principle that no new data meant a roll-forward of the previous position, rather than immediately reverting to a default position. u This method would then provide protection against unnecessary SOQ instability. p This would not completely eradicate the issue, and bucket bands would still be required (for instance in the case of new connections), however we feel they are more suited as a last resort option rather than as a standard default. p Any other suggestions or alternative approaches? 6